Inside Facebook’s early efforts to attack TV

Watch, Facebook's three-month-old hub for original
shows, has yet to produce a commercial hit.

The Facebook-funded shows that have been renewed for
second seasons all share the same trend of initial spikes in
viewership followed by steep declines.

Facebook is judging the success of shows largely based
on the repeat viewers who come back to watch
subsequent episodes, rather than the sheer number of
views the shows garner.

Facebook is still on the hunt for hit shows and is
green-lighting longer shows with bigger budgets, several
Watch partners told Business Insider.

To get a show renewed for Facebook Watch, the social network’s
three-month-old hub for episodic video, one metric you won’t be
judged by is your show’s number of views.

Nearly all of the Facebook-funded shows on Watch that have
been renewed for second seasons enjoyed explosive views of
their first episodes followed by a more than 50% drop in views
for subsequent episodes, according to public Facebook data.

Instead of chasing the millions of views that viral videos often
attract in the News Feed, Facebook is renewing shows that attract
relatively small numbers of viewers who watch through a
season, several partners with shows featured in Facebook's
special Watch tab told Business Insider. And now that the first
slate of launch shows on Watch have run their course, Facebook is
looking to fund longer shows with bigger budgets, the partners
said.

“They’re trying to create TV-like consumption habits on the
platform where people are encouraged to be habitual watchers
versus one-off watchers,” said one partner with several
Watch shows who asked to not be identified discussing Facebook’s
strategy.

Facebook sees fostering TV-like viewing habits as a way to
boost user engagement and eventually rake in the billions of
advertising dollars spent on linear broadcast TV
programming. But by paying for episodic shows, Facebook
is veering from the basic formula responsible for its success in
video to date.

“While it is still early days, one of the great things we have
learned is that video publishers and creators can build an
engaged and predictable audience for their shows on Watch,"
Facebook VP of product Fidji Simo told Business Insider in a
statement.

"Having a loyal audience who comes back to watch every episode is
the foundation for building vibrant communities, which is at the
core of Watch," she said. "We’re already seeing this happen, with
people planning to watch shows they care about, getting drawn
into the storylines and forming communities. When we fund content
or share best practices with partners who want to create these
shows, finding ways to build that audience loyalty, and develop
an active community is a huge part of what we are trying to do."

According to its media partners and industry observers, Facebook
will need to spend more money on high-wattage celebrities
and professional production if it hopes to have the hit
show that makes it a scripted video destination. And even then,
Facebook will be playing in a hit-driven business where even the
most experienced companies see their investments vanish as
quickly as they are made.

Creating TV-like consumption habits

Facebook first announced Watch in early August
with commitments for dozens of shows from partners like
Tastemade, ATTN, and a handful of live events like Major League
Baseball games (Business Insider has multiple shows in the Watch
tab as well). After a test with a small percentage of US Facebook
users, Watch was made available to the rest of the country in
late August.

One of the debut show partners for Watch was A&E’s “Bae or
Bail,” a self-described “reality TV game show where couples face
their fears.” The show’s first episode in early August garnered
32.5 million views despite the fact that Watch was only available
to a subset of US Facebook users at the time. But none of the
following four episodes managed to crack 3 million views.

“Pretty much every show saw the same pattern,” Paul Greenberg,
who led the development of “Bae or Bail” at A&E, told
Business Insider of the show’s initial spike in viewership. “It
was good to see that everybody saw that drop but we were still
higher than most of those shows.”

A&E is still pleased with the reception “Bae or Bail”
received on Facebook, according to the network’s president of
international and digital media, Sean Cohan. “Our expectations
going into this are fundamentally different than a linear show
anyway,” he said. “The core of this is research and development.”

He noted that for "Bae or Bail" the "consumption was
actually pretty robust” compared to A&E’s shows that air
linearly on broadcast TV.

While Facebook has yet to give any numbers that speak to the
early usage of Watchaside from the public
view counts it shows on its site, outside analysis suggests that
shows in the tab are already leading people to spend more time on
Facebook. The average watch time per episode is over 50% higher
than Facebook’s
self-reported average of 16.7 seconds for autoplaying videos
in the News Feed, according to a study of 250 Watch episodes by
Facebook media partner Delmondo.

Facebook is still experimenting with the right mix of shows for
Watch before it decides to aggressively market the
feature like it did for live video in late 2016, multiple Watch
partners said. The Watch tab is prominently displayed in
Facebook’s mobile app in the US and on its desktop website. But
the tab is still restricted to the US and Facebook has done
little to promote it in the News Feed or elsewhere.

“I think this is a space where everyone likes to walk before they
run,” media analyst Rich Greenfield of BTIG told Business
Insider. “You’ll know that Facebook is serious about the Watch
tab when they start telling you to go to the Watch tab.”

The search for a hit

The first episode of
Refinery29's "Strangers" show for Watch reached nearly 9 million
views but none of the following episodes cracked even 200,000
views.Facebook
Watch/Refinery29

When Facebook
began soliciting pitches for shows late last year, the
company indicated in closed-door discussions that it was seeking
scripted shows at the production caliber of ABC’s “Scandal” along
with budgets similar to shows on YouTube’s Red subscription
or Verizon's go90 service.

Facebook declined to discuss the financial terms of its shows,
but the company is
reportedly planning to spend as much as $1 billion on funding
video in 2018. During Facebook’s
most recent earnings call with investors, CFO Dave Wehner
said that funding original video would contribute to a
“significant” increase in spending next year.

Facebook executives have repeatedly said they don’t intend to
spend at the same level as HBO or Netflix for content, the latter
of which plans to spend $8 billion on original video in 2018. But
Watch shows are increasingly becoming attached to A-list actors.

In recent weeks Facebook has pitched celebrities like billionaire
“Shark Tank” star Mark Cuban to host shows for Watch, and
Hollywood figures like Kerry Washington, Zooey Deschanel, and
Bill Murray have all agreed to star in shows since Watch first
debuted.

The effort to reel in big names and
attach them to bigger-budget productions could lead to a hit show
that stirs widespread interest in Watch, multiple show partners
suggested.
The Hollywood Reporter said last week that Facebook was
shifting its strategy to buy more shows outright.

Facebook introduced a TV app for its Watch tab several
months ago.Facebook

Wall Street's tolerance for Facebook's big-budget video
aspirations will not be endless. Spending $1 billion
wouldn’t cause much concern among shareholders, RBC Capital
Markets tech analyst Mark Mahaney told Business Insider. “More
than $1 billion, and I think people would be concerned unless
there was evidence of real traction,” he said.

Mahaney said that Watch will be seen as successful if it boosts
engagement on Facebook and if the shows are able to build
sustained viewership over time. And a mainstream hit show could
help lead people to discover other shows on the platform.
“Netflix works because eventually one or two of these
series catches fires and expands,” he said.

Facebook is directly funding what it internally calls "hero"
shows for Watch but eventually plans to let partners
monetize their content through ad breaks. The company is also
favoring show concepts that include interactive elements that
utilizie features on Facebook like comments under videos. Mike
Rowe's "Returning the Favor" show, for example, picks
which people he visits for each episode based
on suggestions from viewers.

“Long-term, our hope is that the business here will primarily be
through revenue shares of videos that normal creators and
businesses put into the system rather than ones that we
proactively go out and license ourselves,” CEO Mark Zuckerberg
said during Facebook’s last earnings call. “But first we need to
build this behavior where people want to come intentionally to
engage with this content.”

The Watch shows that Facebook pays for currently air on a weekly
schedule, similar to traditional TV programs. After a show
airs for the first time, people can
re-watch it on-demand. But at a time when
younger viewers are accustomed to binge-watching Netflix shows,
Facebook's decision to schedule shows is a risky move that's
still unproven. (Netflix CEO Reed Hastings is a Facebook board
member.)

While early Watch partners are content to experiment with making
shows now, the initiative needs to transition from the research
and development phase to producing meaningful revenue, according
to A&E exec Sean Cohan.

“I wouldn’t say anyone is betting the farm on these things,” he
said. “But I think we’re optimistic that these platforms will
find ways to compensate creators in meaningful ways.”